South African grocery giant Pick n Pay (PIKJ.J) has successfully raised 4 billion rand ($217 million) through a rights offer, which was oversubscribed by 106%, the company announced on Monday. As the nation’s third-largest grocery group, Pick n Pay aims to use the proceeds to reduce its debt and invest in its turnaround strategy.
Pick n Pay, which operates 2,279 stores across South Africa and in seven other African countries, revealed that 98.7% of its shareholders exercised their rights. The company also received excess applications totaling 4.3 billion rand. Only 1.3% of excess rights offer shares were needed to make up the full 100% subscription. As a result, the joint underwriters did not have to subscribe to any rights offer shares.
Chief Executive Sean Summers expressed optimism about the outcome. “The successful conclusion of the rights offer demonstrates the market’s strong confidence in our iconic brand and in our turnaround strategy,” Summers said. “It marks a crucial first step in our recapitalization plan, positioning the group well to fund long-term sustainable growth.”
The funds raised from the rights offer will be used to pay down Pick n Pay’s debt, stabilize its balance sheet, and support its turnaround strategy. This strategy includes closing or converting over 100 loss-making Pick n Pay supermarket stores. The company is committed to reviving its retail business, which has been losing market share to larger competitors like Shoprite (SHPJ.J) and others for more than a decade.
Pick n Pay’s core supermarket business has seen a decline in performance, resulting in a significant trading loss of 1.5 billion rand in the Pick n Pay division and an overall group loss of 3.2 billion rand for the 52 weeks ending on February 25. Additionally, the company’s net debt has increased to 6.1 billion rand over the year.
Sean Summers, tasked with turning the company around through a two-step recapitalization plan, emphasized that the rights offer is just the beginning. The company plans to utilize the newly raised capital to fund sustainable growth initiatives. These initiatives are expected to enhance Pick n Pay’s market position and financial health in the long run.
The oversubscription of the rights offer indicates strong market confidence in Pick n Pay’s brand and strategic direction. Investors have shown their support for the company’s efforts to turn around its business and achieve long-term growth. This positive response from the market is a promising sign for Pick n Pay as it embarks on the next phase of its transformation.
Summers noted that the successful rights offer is a testament to the market’s belief in Pick n Pay’s potential. “We are grateful for the overwhelming support from our shareholders,” he said. “This is a clear indication that the market believes in our ability to execute our turnaround strategy and deliver sustainable growth.”
